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Hyatt Hotel, Melbourne, 2.35pm, Friday 16 May 1997: transcript of doorstop interview [Budget; Industrial relations]

EEO

JOURNALIST: Treasurer, the Prime Minister in Sydney apparently was also talking about the possibility of further changes in the industrial relations system in Australia. What is the Government currently considering?

TREASURER: Well I made the point today that improving our industrial relations system improves employment in the country. And as you look around the world, those countries that have made the biggest strides have got the best employment outcomes. Now, the measures that we have put in place only took effect on the 1st of January, we've got to allow them time to work. But as it becomes easier to employ people and to tailor wage and salary packages to the needs of a business, employment opportunities will grow. This is a point I think the public needs to be reassured about, that changes in industrial relations are changes which are pro- jobs.

JOURNALIST: Ian Macfarlane says we need more changes. Do you think we need more on top of what you've already done?

TREASURER: Well, I think it's fair to give the changes that we've put in place the chance to work. They only came into effect on the 1st of January and it's far too early to say that we've had the opportunity to take full advantage of them. I think it's important that we allow them to work. But the point that Mr Macfarlane's making, and that I am making, is that the degree to which you can improve your industrial relations and employment system is the degree to which you can improve employment prospects. That's the point that we're trying to make here.

JOURNALIST: Treasurer, did you see Mr Macfarlane speech before it was delivered yesterday?

TREASURER: From recollection yesterday I was tied up in Parliament all day, I wasn't reading anybody's speeches. No disrespect to Mr Macfarlane of course.

JOURNALIST: Then perhaps the day before?

TREASURER: I was even busier the day before, if I may say so, in Canberra.

JOURNALIST: Do you think Australia's unemployment rate could get down to the levels seen in the UK and the US?

TREASURER: Well, look, our aim is to get best performance in relation to employment. There are two things that are going to do this. One, improvements in our system of industrial relations. And two, sustained economic growth. Now, in this country, what we should be looking for is not the boom/bust, but a long economic cycle. Now, we haven't seen a long economic cycle for a couple of decades, but with the low inflation rate, inflation is now back where it was in the '70s. With low interest rates, interest rates are now back where they were in the '70s, our home mortgage rates, where they haven't been since 1969. With sustainable savings, and we're putting in place a way of putting the Commonwealth into saving, we should be looking at a very long economic cycle and that's what I am looking for.

JOURNALIST: And how long is that cycle, Mr Costello? You use the term a decade in relation to what the Government was aiming at. Is that your aim?

TREASURER: I'm looking at economic cycles that can run for a decade, yes. And if they can run longer, so much the better.

JOURNALIST: So, is that 10 years from now, or is it 10 years all up?

TREASURER: Well, let's take as many as we can get. You know, I'm not going to get into a position where I say, well we're aiming at 10 years and we got to 10 years and that's it. You know, let's kick the place down again. What I'm saying is, let's put in place the measures that can allow a long run of the economic cycle and I think we are. Now, absent some major international events, the prospects are good. You know, it's inflation of the dimensions we've haven't seen since the '70s, we've got low interest rates and we're whirring the Commonwealth back into the business of saving. Very good opportunities that are in front of us.

JOURNALIST: Do we get those Anglo- model jobless rates here in Australia with the industrial relation reform we've already set up, or will we have to go further?

TREASURER: Well, you know the point I'm trying to make to you is never look for your next meal until you've consumed this one. And we have some changes coming in place, let's savour them. As that meal goes down, let's savour that meal, rather than focus on the next one.

JOURNALIST: Treasurer, just about the current menu that you came up with last week, you predicted wages growth of 4 per cent, which is below what it is at the moment, and considering the IRC decision yesterday, do you think that the steam has been taken out of wages growth?

TREASURER: Well if we hadn't have had the decision that we had yesterday, the prospects wouldn't have been as good. So, it was a good decision yesterday, the kind of decision that we were looking for. The last wages figures were unexpectedly high, and hopefully we'll have some further data in relation to them later on in the month, a breakdown of the composition in relation to those wages, but the point that I want to make to people is this. I think it's very important this is understood. When you're running a CPI of 1 point something per cent, and when you're running underlying inflation in the twos, you don't need wage increases to catch up with prices. Prices are not moving. You don't need those wage increases in the way that you sought them in the past. Now, we can have wage increases, as long as we get them by boosting productivity. But we should be thinking of 4 per cent as being the upper bar, the 4 to 5 per cent, not the starting point. And some of these wage claims that you see, 7 or 8 per cent in an inflation society of 1 to 2, the risk is for unemployment.

JOURNALIST: ...4 per cent, Treasurer, are you referring to 4 per cent wages growth, or 4 per cent wage claims?

TREASURER: Well, I'm saying that because we want our outcomes of 4 per cent or 4 to 5 at the maximum, then the claims ought to be 4 per cent. That's what they ought to be. That's the kind of outcome. We're not in this position...in the past, when we were a high inflation economy, you know, people would say, well, inflation is 6 and we don't know where it's going to be next year, so let's put in a claim for 20, or let's put in a claim for 18, so that we can cover it. You don't need to do that anymore. This is a low inflation economy and I think one of the reasons why it's taking time for people to understand that is that, you know, unless you were around in the '60s or the early '70s, you haven't lived through an economic period like this before, you just haven't been in it and so people have to adjust their thinking accordingly.

JOURNALIST: Treasurer, you talked about keeping tax rates low, and you said that we do the hard yards now and it'll pay dividends later. Is there any reason that we shouldn't interpret that as meaning if we continue to get growth and it continues to go OK, then we can have tax cuts towards the year 2000?

TREASURER: Well, you know, the Budget programs which we've laid out gets the Commonwealth into surplus on the existing revenue- to- GDP rates, below 25. What that means is that we don't need new taxes to pay for our spending. We've got spending under control. And if we keep it under control, we can return the dividends. Now I'm not talking about returning the dividends now, next year, because we've just returned some of the dividends, we've just introduced a savings rebate. But down the track, the vision that we have is once we've got our Commonwealth Budget into surplus and we've fixed our savings problem, we can keep tax rates low.

JOURNALIST: So perhaps the second term could deliver tax cuts, if all goes to plan.

TREASURER: Well, let me make this clear. The position of the Liberal Government is always going to be efficient Government and low taxes. What we do in a second term, which is a long way away, will always be consistent with our general objectives. But I'm not announcing that now, because, you know, give us a break, fellas, we're only half way through the first term. Thanks.